When firms have an incentive to exit a competitive market,their exit will

Question

Quizplus · Accepted Answer

When firms exit a competitive market, it decreases the supply of the product, which allows the remaining firms to increase their market share and profits. This is because the reduced supply leads to an increase in price, which benefits the firms that are still in the market. Therefore, the exit of some firms from the market raises profits for the firms that remain in the market. Option A is incorrect because the exit of firms reduces supply and pushes up prices, so it does not lower market price. Option B is incorrect because the exit of firms reduces competition and could potentially lower costs for the remaining firms. Option D is also incorrect because the exit of firms does not directly impact demand for the product.

When Firms Have an Incentive to Exit a Competitive Market,their